Journal Entry for Recovery of Bad Debts

Explanation: When a debtor fails to make payment of the amount due, the amount is written off as bad debts. However, sometimes, the debtor may pay the amount even after it has been written off as bad debts. In such cases, the amount received is recorded in the books of accounts by passing a journal entry.

Journal Entry:

Date | Particulars | L.F | Debit (Rs.) | Credit (Rs.)
----|------------|-----|-------------|-------------
[Date] | Bank A/c | Dr. | 20,000 |
| To Bad Debts Recovered A/c | | | | 20,000

Explanation:

The above journal entry is passed when a debtor pays the amount which was written off as bad debts in the previous year. The journal entry is explained as follows:

- Bank A/c: The amount received is debited to the Bank A/c as it is a real account and the amount is received in cash or through bank transfer.
- Bad Debts Recovered A/c: This account is credited with the amount received as it is a nominal account and the amount received is an income for the business.

Conclusion:

Thus, the above journal entry is passed to record the recovery of bad debts. It helps in maintaining accurate books of accounts and provides a clear picture of the financial position of the business.

Cash A/c Dr. Rs.20,000
To Bad Debts Recovered A/c Rs.20,000